Think Like An SMSF Auditor. Five tips to help you provide better SMSF advice to your clients.

1. Think like an auditor
greatly improve your SMSF
advice

2. Disclaimer
This presentation was prepared by SMSF Outsource Solutions
ABN 37 373 020 559.
SMSF Outsource Solutions is a provider of independent SMSF audit
services to accountants, advisors and Trustees.
The information contained in this presentation is intended as general
information only and has been prepared without taking into account the
needs, objectives or financial information of any particular person. Prior
to making any decision, you should assess whether the information is
appropriate to your particular needs, objectives and financial circumstances.
While SMSF Outsource Solutions has taken reasonable care in the preparation
of this information, subsequent changes in circumstances (including legislative
change) may occur at any time and may impact on the accuracy of this information.

3. Let’s have some fun!!
Open your mind,
don’t mind the stereotypes!

4. The stakes are high
the value of a good night sleep

5. Everyone grab an “audit
hat”
prevention is always better
than the cure
Choose your
auditor wisely
Every SMSF
professional
should own their
very own “audit
hat”

6. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #1 Complete
advice that covers
the life of the
investment

7. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #2 Consider
every SIS rule that
may apply

8. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #3 Dot the
i’s and cross
the t’s

9. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #4 Address
the
practicalities
Step by Step

10. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #5 Think
about “what
could go
wrong”

11. Everyone grab an “audit
hat”
prevention is always better
than the cure
Tip #4 Address the
practicalities
Step by Step
Tip #5 Think about “what
could go wrong”
Tip #1 Complete advice
that covers the life of
the investment
Tip #2 Consider every
SIS rule that may apply
Tip #3 Dot the i’s and
cross the t’s

12. Get proactive with your
auditor
it starts on Day One
• Communicating from Day
One
• Pre- Audit checklist
• Save time and aggravation!
• Minimise the assumptions
your
auditor has to make

13. Audit War Stories
what can we learn?
Case Study 1: Business Real Property
The Hill Family SMSF purchased a commercial property from the members
in 2008/09 for $1.5 million. The Trustees acted under the advice of their
accountant who recommended the property be transferred into their SMSF
for tax planning and asset protection.
At the time the property was acquired from the members, it was leased
solely to the Hill family business. The accountant was meticulous in ensuring
the property met the business real property definition to be able to be
purchased from the members (SIS s.66), a formal valuation was obtained to
support the purchase price, and the transfer was done on arms length
terms.
The super fund received legal title to the property on 15 June 2009. So all
looked good. However during the advice stage the accountant had focused
solely on getting the property into the fund and the SIS rules that related
solely to that transaction………so what happened next?

14. Audit War Stories
what can we learn?
• Rental arrangements with related party
The family business continued to use the property for business use but no
written lease agreement was put in place and as a result the Trustees never
formally set what rent was due and when. In fact no rent was paid from the
business to the SMSF until 30 June when $150,000 was transferred across
as rent for the 2010 year.
• A New residential tenant spells “In-House
Asset”
Only a couple of months after the original purchase, the Trustees decided to
lease out a section of the premises to an unrelated third party. Great
intentions to maximise the return for their fund. The accountant gave the OK
and perhaps because it hadn’t been addressed in the original advice failed
to recognise the property needed to continue to be “business real property”
indefinitely.
The accountant gave the OK, the residential lease was signed with the arms
length tenant and from 15 Sep 09 the property was no longer business real
property.

15. Audit War Stories
what can we learn?
Case Study 2: Related Party Loan
A client calls his advisor to check if his super fund can make a
loan to a related party for $30,000.
The advisor checks the market value of the fund’s assets and
confirms the loan will be < 5% of the assets so there’ll be no
problems. The client goes ahead with the loan.
How many ways could a loan under 5% of the assets of the
fund breach SIS?

16. Audit War Stories
what can we learn?
• Loans to members or their relatives
• No written loan agreement
• No interest charged or interest below market value
• No interest or capital repayments & no action to recover
• Does the fund have other in-house assets?
• Investment strategy
• Ability to repay – early access?
• Avoidance issues – look through provisions

17. Audit War Stories
what can we learn?
What’s hot for 2011
• Limited recourse loans
• Contribution cap breaches – limits reduced, bring forward
triggers
• Related trusts failing Reg 13.22C
• Loans to members
• Acquisition of assets from members not permitted
• Personal use of holiday houses
• Confusion over conditions of release
• Non arms length transactions

18. Independence?
There’s a BIGGER
picture
what floats your boat?
87% of firms surveyed that use outsourcing say it
delivers the benefits that they expected
-PWC “Outsourcing comes of age”
.
• The golden ticket?
• Not all outsourcing
arrangements
are equal
• Auditors – proof of the
integrity of
the SMSF industry
• A commercial business
decision,
not a legislative decision!

19. Independence?
There’s a BIGGER
picture
what floats your boat?
HOT TIP:
Interview your auditor like you would
a potential new and important
member of your team
Why you MUST get it right:
• Quality control - Your safety
net
• Your reputation & brand
• Expand your knowledge pool
• Turnaround
• Client Relationships

20. Walkman or I-pod?
taking your practice to the
next level
• Structured & unstructured staff training
• Quality of work-papers and process
improvement
• Increase efficiency to improve profitability &
cash-flow
• Software selection
• Compliance support when you need it most
• Managing contribution cap issues
• Maximising pension and tax efficiency

21. Walkman or I-pod?
taking your practice to the
next level
• Pro-active communication
• Improve client relationships
• Minimise client stress when things go wrong
• Trustee education
• Succession planning
• Appropriate & timely rectification

22. Let’s work together –
rectifying breaches
EVERY problem has a solution!
• Don’t Panic
• Take advantage of your auditor’s experience
• Aim for a Rectified breach
• Be careful not to over-rectify
• Co-operate

23. Think like an auditor = a real
competitive advantage
taking your practice to the
next level
The stakes are
high
Put on your
own “audit hat”
Get proactive
with your auditor
Independence
?
Think bigger!
Value-add
audits – the
next
generation

24. Upcoming Events
Date Details
Tues, 15 March 2011 Divorce & Super – Marriage breakdown in SMSFs
Guest speaker: Julie Steed, Australian Executor Trustees Ltd
Tues, 19 April 2011 SMSF Technical & Legislative update
Guest speaker: Peter Burgess, SPAA Technical Director

25. greatly improve your SMSF
advice